While Washington Sleeps

Beijing expands its influence in Latin America.

Jaime Daremblum

January 25, 2010, Vol. 15, No. 18

While riding in a taxi in my native Costa Rica recently, I saw the country’s magnificent new national soccer stadium rising—it is scheduled to open later this year. The Chinese government bankrolled the $83 million stadium project after Costa Rica ended its diplomatic recognition of Taiwan and launched official relations with Beijing. Journalists have referred to the stadium as a “gift” from China to Costa Rica. And, as my cab driver told me, the rulers in Beijing sent hundreds of Chinese workers to do the construction work.

The Costa Rican soccer stadium is a symbol of Beijing’s growing interest in Latin America and its quasi-colonial attitude toward the developing world at large. Over the past decade, China has flooded Latin America, Africa, and Asia with investment. While it has not brought the same technological benefits as U.S. or European investment, it has brought an influx of low-wage Chinese workers. The arrival of these workers has complicated the economic impact of Chinese-funded development projects; it has also fostered social tensions in the recipient countries. “In some countries,” the New York Times reported in December, “local residents accuse the Chinese of stealing jobs, staying on illegally, and isolating themselves by building bubble worlds that replicate life in China.”

At a basic level, China’s overseas investment binge has been driven by its domestic demand for raw materials. In a March 2008 cover story titled “The New Colonialists,” the Economist observed that China uses more than one-fourth of the world’s aluminum, a third of the world’s steel, and half the cement. Rapid economic growth has given China a voracious appetite for such commodities.

While the U.S. Congress is dithering and refusing to support free trade deals with Colombia and Panama, Beijing is aggressively expanding its trade relations across the Western Hemisphere. According to the Latin Business Chronicle, China’s overall trade with Latin America grew by 40 percent between 2007 and 2008; it was more than three times higher in 2008 than in 2004. Between 2007 and 2008, Latin American exports to China increased by 41 percent. They “grew by more than four times compared with exports to the United States last year and more than three times compared with exports to the European Union.”

China signed a free trade agreement with Chile in 2005, and last year it signed one with Peru. These are Beijing’s first trade agreements with countries outside its home region. The Chinese are currently negotiating a trade agreement with Costa Rica. Last March, Uruguayan president Tabaré Vázquez traveled to China and solidified an expansion of trade and investment cooperation. In May, the Brazilian trade minister announced that China had become Brazil’s biggest trading partner (passing the United States), shortly before Brazilian president Lula da Silva visited Beijing and completed several bilateral agreements. Prior to leaving for Asia, Lula told reporters that his China trip represented “one of the most important I am going on to defend a new economic order and a new commercial policy in the world,” according to Agence France-Presse. By boosting trade with these countries, China has improved its access to abundant supplies of copper (from Chile), zinc (from Peru), meat (from Uruguay), iron ore (from Brazil), and other commodities.

Beijing has also increased economic cooperation with the leftist countries that belong to Hugo Chávez’s Bolivarian Alternative for the Americas, particularly Bolivia and Ecuador. Those two countries may seem strategically inconsequential up here, but the Chinese government is eager to benefit from Bolivia’s lithium and Ecuador’s oil. Beijing has agreed to develop Bolivia’s first communications satellite, which will reportedly cost around $300 million, and a Chinese firm (Sinohydro Corporation) has been contracted to build a $2 billion hydroelectric plant in Ecuador.

China has already constructed a $400 million communications satellite for Venezuela. (It launched in October 2008, and the Chávez regime assumed control of it in January 2009.) Beijing and Caracas enjoy an increasingly close economic relationship, with China a massive consumer of Venezuelan oil. Last year, the Chinese and Venezuelan governments agreed to increase the size of their joint investment fund from $6 billion to $12 billion.

At a December 11 briefing, Secretary of State Hillary Clinton was asked about growing Chinese and Iranian activity in Latin America. “We have no problem with any country such as China engaging in economic activities—business, commerce—with any country anywhere,” she said. “But we do want governments to drive hard bargains. We don’t want to see corruption that benefits the fortunes of a few leaders and undermines the sustainability of the economy and the environment and the natural resources of any country.”

Clinton then spoke of Iran in much harsher terms, denouncing the Iranian regime as the world’s chief terror sponsor and warning that it would be “a really bad idea” for Latin American countries to embrace Ahmadinejad & Co. “If people want to flirt with Iran, they should take a look at what the consequences might well be for them,” she added.

As Clinton indicated, Tehran’s agenda in Latin America—particularly the strategic partnership with Chávez that has undermined international sanctions against Iran and helped Hezbollah establish a presence in Venezuela—is far more worrisome than Beijing’s. Still, given all the uncertainty about China’s global and regional intentions and its support for brutal dictatorial governments (Iran, North Korea, Sudan, Burma), its headlong rush into the Western Hemisphere should raise at least some concerns, especially as Latin American officials are frustrated with Washington’s lack of engagement in the region.

When President Bush took office in 2001, he talked of forming a Free Trade Area of the Americas. Today, Congress won’t even ratify bilateral free trade agreements with Colombia and Panama. The Obama administration insists that it wants to finalize these deals, but Democratic lawmakers are not cooperating. While Obama has promoted greater military cooperation with Colombia, it seems that the labor unions have effectively been given control of U.S. trade policy, which explains why the president has been unable to make any real progress on hemispheric trade, and indeed why he has made several protectionist mistakes (such as canceling a trucking program with Mexico).

Meanwhile, the Chinese keep increasing their economic activities in the region. Despite its apparent “diplomatic truce” with Taiwan, one of China’s long-term strategic goals in Latin America is to encourage countries that still have formal relations with Taipei (such as El Salvador, Guatemala, Honduras, Nicaragua, Panama, and Paraguay) to end those relations and “transfer” official recognition to Beijing. China refuses to have official relations with countries that recognize Taiwan.

The Chinese push into the Americas is no cause for panic—after all, Latin American trade with China has raised living standards and promoted GDP growth around the region—but it should compel U.S. policymakers to reinvigorate Washington’s -commitment to hemispheric trade liberalization. It is quite discouraging to think that China’s Communist rulers are more enthusiastic than the U.S. Congress about trading with Latin America.

Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for Latin American Studies at the Hudson Institute.